Washington, Dec. 31 (Reuters): A US military energy unit announced yesterday that it was taking over the task of providing fuel for Iraq, ending a Pentagon deal with Vice-President Dick Cheney’s former company Halliburton amid allegations of price gouging by the Texas-based energy services giant.

The Pentagon’s defence energy support centre said it had been directed to assume control of rebuilding Iraq’s oil industry and that it would award new contracts through a competitive bidding process.

The Washington Post todayquoted Pentagon officials as saying that the change had been under discussion for months and that the timing was not related to allegations against Halliburton subsidiary Kellogg Brown & Root (KBR), which was awarded a no-bid contract in March to rebuild Iraq’s oil industry.

The defence energy support centre said in a statement that the agency had been directed to “support the Iraqi ministry of oil and Task Force-Restore Iraqi Oil (TF-RIO) by importing and distributing fuel to the Iraqi civilian population.”

“The centre will strive to put competitively awarded contracts in place as quickly as possible for this mission,” DESC director Richard Connelly said.

“Existing TF-RIO contracts will remain in place until adequate DESC contract solutions are implemented.”

A KBR spokesperson was not immediately available for comment.

Earlier this month, the Pentagon said that a draft audit found evidence that KBR may have overcharged US taxpayers $61 million to supply fuel to Iraq from Kuwait.

In response to questions posed by Pentagon auditors, KBR’s president and chief executive, Randy Harl, said the firm “delivered fuel to Iraq at the best value, the best price and the best terms.”

Harl also said that the US military had approved the delivery of fuel from Kuwait, even though it was at a higher cost than that available via Turkey.

KBR was the first to suggest ways of cutting costs and had suggested Turkey was a better source than Kuwait for getting fuel into Iraq, adding that the recommendation resulted in a $164-million savings for American taxpayers.

The US army corps of engineers said in October that it would replace by the end of December KBR’s no-bid deal. But at the beginning of the month, the corps extended the deadline for awarding two new contracts until January 17, 2004.

The work given to KBR in Iraq has been criticized by Democrats, who alleged cronyism and favoritism in handing out the contracts.